Republicans eye more generous tax cut for blue-state residents

Republican lawmakers on Tuesday were pushing toward a final deal on a $1.4 trillion tax-cut package, eying a more generous rate cut for the wealthy and a less generous one for corporations as they try to appease wealthy blue-state residents.

Talks were still fluid late Tuesday, but lead negotiators were weighing a top individual tax rate of 37 percent — down from 39 percent. The goal was to help rich New Yorkers, Californians and others who fear they would end up with a tax increase after losing deductions for their high state taxes.

To make the numbers work, Republicans were considering a 21 percent corporate income tax rate — slightly higher than the 20 percent in earlier plans.

House Ways and Means Committee Chairman Kevin Brady wouldn’t comment on the negotiations, but told reporters late Tuesday that lawmakers want most Americans to get a tax cut.

“That’s what the discussions are about — how best to to finalize that,” said Mr. Brady, who is chairing the House-Senate conference committee working out differences between the two chambers’ bills. “I’m just really pleased the direction we’re going on this.”

Mr. Brady had said earlier in the day that lawmakers were on track to release the final text of the legislation by the end of the week.

GOP leaders want to vote on a final deal next week before tackling other end-of-year issues.

Sen. John Thune, South Dakota Republican and a tax bill conferee, said the corporate and individual rate levels were issues in play.

“Obviously, when you make changes you got to find ways to offset some of those,” Mr. Thune said.

The House-approved bill left the top individual rate at 39.6 percent, while the Senate plan lowered it to 38.5 percent.

Both plans lowered the corporate rate from 35 percent to 20 percent, which was already higher than the 15 percent rate President Trump had wanted. Going above 20 percent would be a blow to the White House, but lawmakers said it could be a necessity as they look for money to restore other breaks on the chopping block.

Congressional scorekeepers have estimated that each percentage point in the corporate tax rate translates to about $100 billion in revenue over the 10-year budget window.

Republicans are desperate to end up with a corporate rate lower than the worldwide average of 22.5 percent, and conservative tax activists urged lawmakers this week to hold the line against any hikes, calling 20 percent a compromise already.

“We wanted to be at 15,” said Grover Norquist, president of Americans for Tax Reform. “Twenty-one, 22 — those are positions on the way back to 25.”

Chrissy Harbin, vice president of external affairs at Americans for Prosperity, a pro-free market group backed by the Koch brothers, said her group would be “very, very, very disappointed” if the final package had a rate higher than 20 percent.

But she wouldn’t go as far as saying they were prepared to actively oppose a plan with a rate higher than 20 percent.